Posts Tagged ‘mortgage rates’

Last Week in the News
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The National Association of Home Builders/Wells Fargo housing market index fell one point in August to 13. Economists had anticipated a reading of 15. It was the lowest reading since March 2009. An index reading below 50 indicates negative sentiment about the housing market.
The combined construction of new single-family homes and apartments in July rose 1.7% to a seasonally adjusted annual rate of 546,000 units. Applications for new building permits, seen as an indicator of future activity, dropped 3.1% to an annual rate of 565,000 units.
The producer price index, which tracks wholesale price inflation, rose 0.2% in July, following a 0.5% decrease in June. Core prices — excluding food and fuel — rose 0.3% after a 0.1% increase in June. For the year, wholesale prices are up 4.1%.
Industrial production at the nation’s factories, mines and utilities increased 1% in July, following a revised 0.1% drop in June. Economists had anticipated a gain of 0.6%. Capacity utilization rose to 74.8% in July, the highest level since November 2008.
The Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending August 13 increased 13%. Refinancing applications rose 17.1%. Purchase volume fell 3.4%.
Initial claims for unemployment benefits rose by 12,000 to 500,000 for the week ending August 14. It was the highest level since November 2009. Economists had projected claims would fall to 480,000. Continuing claims for the week ending August 7 fell by 13,000 to 4.48 million.
Upcoming on the economic calendar are reports on existing home sales on August 24, new home sales on August 25 and gross domestic product on August 27.

Last Week in the News
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According to the ICSC-Goldman Sachs index, retail sales fell 0.2% for the week ending August 7. On a year-over-year basis, retailers saw sales increase 3.7%.
The Labor Department reported that in the second quarter productivity fell at an annual rate of 0.9%, labor costs rose at an annual rate of 0.2% and hours worked climbed at a 3.6% rate. This is a likely signal that employers have reached efficiency limits out of leaner staffs. In 2009, productivity rose 3.5%, the highest rate in six years.
Wholesalers increased their inventories 0.1% in June, following a 0.5% rise in May. Sales at the wholesale level fell 0.7% in June, the most since March 2009. Economists had anticipated inventories would increase 0.4% in June.
The Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending August 6 increased 0.6%. Refinancing applications rose 0.6%. Purchase volume rose 0.3%.
The trade deficit increased 18.8% to $49.9 billion in June. It was the highest level since October 2008 and follows a $42 billion gap in May. Economists had expected the trade deficit to rise to $42.1 billion. Exports fell 1.3% to $150.5 billion. Imports increased 3% to $200.3 billion.
Initial claims for unemployment benefits rose by 2,000 to 484,000 for the week ending August 7. It was the highest level since mid February. Economist had projected claims would fall to 465,000. Continuing claims for the week ending July 31 fell by 118,000 to 4.45 million.
Upcoming on the economic calendar are reports on the housing market index on August 16, housing starts on August 17 and the index of leading economic indicators on August 19.
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Last Week in the News
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The Institute for Supply Management reported that the monthly composite index of manufacturing activity was 55.5 in July after reaching 56.2 in June. A reading above 50 signals expansion. It was the 12th straight month of expansion.
Total construction spending rose 0.1% to $836 billion in June, following a downwardly revised $834.8 billion in May. Economists had anticipated a drop of 0.8% in June.
Factory orders fell 1.2% in June to a seasonally adjusted $406.4 billion. The decline was more than double the 0.5% economists had anticipated and follows a revised decrease of 1.8% in May.
The National Association of Realtors reported that its pending home sales index, a forward-looking indicator based on signed contracts, fell 2.6% in June after a 30% decrease in May. On a year-over-year basis, pending home sales are down 18.6%.
The Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending July 30 increased 1.3%. Refinancing applications rose 1.3%. Purchase volume rose 1.5%.
The Institute for Supply Management reported that the monthly composite index of non-manufacturing activity rose to 54.3 in July from 53.8 in June. A reading above 50 signals expansion. It was the seventh consecutive month of growth. Economists had anticipated a reading of 53.
Initial claims for unemployment benefits rose by 19,000 to 479,000 for the week ending July 31. Continuing claims for the week ending July 24 fell by 34,000 to 4.54 million. The unemployment rate remained unchanged at 9.5% in July.
Upcoming on the economic calendar are reports on wholesale trade on August 10, international trade on August 11 and retail sales on August 13.
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Last Week in the News
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New home sales rose 23.6% in June to a seasonally adjusted annual rate of 330,000 units from a revised rate of 267,000 units in May. Economists had expected a pace of 310,000 units. On a year-over-year basis, sales of new homes have fallen 16.7%.
The Standard & Poor’s/Case-Shiller 20-city housing price index — on a seasonally adjusted basis — rose 1.3% in May after a 0.9% increase in April. On a year-over-year basis, property values increased 4.6%, the largest gain since August 2006.
The consumer confidence index fell to 50.4 in July from an upwardly revised 54.3 in June. Economists had anticipated a reading of 51. The index was benchmarked at 100 in 1985, a year chosen because it was neither a peak nor a trough in consumer confidence.
The Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending July 23 dropped 4.4%. Refinancing applications fell 5.9%. Purchase volume rose 2%.
Orders for durable goods — items expected to last three or more years — fell 1% in June after decreasing a revised 0.8% in May.
Initial claims for unemployment benefits fell by 11,000 to 457,000 for the week ending July 24. Continuing claims for the week ending July 17 rose by 81,000 to 4.57 million.
The Commerce Department announced that gross domestic product — the total output of goods and services produced in the U.S. — increased at an annual rate of 2.4% in the second quarter of 2010. Economists had expected a slightly larger 2.5% increase. This follows a revised 3.7% pace of growth in the first quarter of 2010.
Upcoming on the economic calendar are reports on construction spending on August 2, pending home sales on August 3 and consumer credit on August 6.

Last Week in the News
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The National Association of Home Builders/Wells Fargo housing market index fell two points in July to 14. Economists had anticipated a reading of 16. It was the lowest reading since April 2009. An index reading below 50 indicates negative sentiment about the housing market.
According to the ICSC-Goldman Sachs index, retail sales rose 1.4% for the week ending July 17. On a year-over-year basis, retailers saw sales increase 4.2%, the best showing in two months.
The combined construction of new single-family homes and apartments in June fell 5% to a seasonally adjusted annual rate of 549,000 units. Applications for new building permits, seen as an indicator of future activity, rose 2.1% to an annual rate of 586,000 units.
The Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending July 16 increased 7.6%. Refinancing applications rose 8.6%. Purchase volume rose 3.4%.
Existing home sales fell 5.1% in June to a seasonally adjusted annual rate of 5.37 million units from 5.66 million units in May. The inventory of unsold homes on the market increased 2.5% to 3.99 million, an 8.9-month supply at the current sales pace, up from an 8.3-month supply in May.
Initial claims for unemployment benefits rose by 37,000 to 464,000 for the week ending July 17. Continuing claims for the week ending July 10 fell by 223,000 to 4.567 million.
The index of leading economic indicators — designed to forecast economic activity in the next three to six months — fell 0.2% in June after a revised 0.5% gain in May.
Upcoming on the economic calendar are reports on new home sales on July 26, the housing price index on July 27 and gross domestic product on July 30.
Click here to visit my website and apply on line:
www.DavidJGarofalo.com

Last Week in the News
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The trade deficit increased 4.8% to $42.3 billion in May. It was the highest level since November 2008 and follows a $40.3 billion gap in April.
The Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending July 9 decreased 2.9%. Refinancing applications fell 2.9%. Purchase volume fell 3.1%.
Retail sales fell 0.5% in June, after a revised 1.1% decline in May. Economists had anticipated retail sales to fall 0.2% in June.
Total business inventories rose 0.1% in May, following a 0.4% increase in April. Total business sales fell 0.9% in May, the first decline after 13 consecutive monthly gains.
The producer price index, which tracks wholesale price inflation, fell 0.5% in June following a 0.3% decrease in May. Core prices — excluding food and fuel — rose 0.1%. For the year, wholesale prices are up 2.7%.
Industrial production at the nation’s factories, mines and utilities increased 0.1% in June following a 1.3% gain in May. Capacity utilization was unchanged at 74.1% in June.
Consumer prices fell a seasonally adjusted 0.1% in June following a 0.2% decline in May. For the year, consumer prices are up 1.1%.
The Reuters/University of Michigan consumer sentiment index for July’s preliminary reading fell to 66.5 from 76 in June. It was the lowest level since August 2009.
Initial claims for unemployment benefits fell by 29,000 to 429,000 for the week ending July 10. Continuing claims for the week ending July 3 rose by 247,000 to 4.68 million.
Upcoming on the economic calendar are reports on new home sales on July 26, the housing price index on July 27 and gross domestic product on July 30.
Click here to visit my website and apply on line:
www.DavidJGarofalo.com

Last Week in the News
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The Standard & Poor’s/Case-Shiller 20-city housing price index — on a seasonally adjusted basis — rose 0.8% in April after a 0.1% decline in March.
The consumer confidence index fell to 52.9 in June from a revised 62.7 in May. Economists had anticipated a reading of 62.8. The index was benchmarked at 100 in 1985, a year chosen because it was neither a peak nor a trough in consumer confidence.
The Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending June 25 increased 8.8%. Refinancing applications rose 12.6%. Purchase volume fell 3.3%.
The Institute for Supply Management reported that the monthly composite index of manufacturing activity was 56.2 in June after reaching 59.7 in May. A reading above 50 signals expansion. It was the 11th straight month of expansion.
Total construction spending fell 0.2% to $841.9 billion in May, following a revised 2.3% rise in April. Economists had anticipated a steeper drop of 0.5% in May.
The National Association of Realtors reported that its pending home sales index, a forward-looking indicator based on signed contracts, fell 30% in May after a revised 6% increase in April.
Factory orders fell 1.4% in May, more than the 0.5% decrease economists had anticipated. The drop — the biggest since March 2009 — ended eight straight monthly gains.
Initial claims for unemployment benefits rose by 13,000 to 472,000 for the week ending June 26. Continuing claims for the week ending June 19 rose by 43,000 to 4.62 million. The unemployment rate in June fell to 9.5% from 9.7% in May.
Upcoming on the economic calendar are reports on chain store sales on July 7 and wholesale trade on July 9.
Click here to visit my website and apply on line:
www.DavidJGarofalo.com

Last Week in the News
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Existing home sales fell 2.2% in May to a seasonally adjusted annual rate of 5.66 million units from a revised 5.79 million units in April. The inventory of unsold homes on the market decreased 3.4% to 3.89 million, an 8.3-month supply at the current sales pace, down from an 8.4-month supply in April.
The Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending June 18 decreased 5.9%. Refinancing applications fell 7.3%. Purchase volume fell 1.2%.
New home sales fell 32.7% in May to a seasonally adjusted annual rate of 300,000 units from a downwardly revised rate of 446,000 units in April. It was the slowest sales pace since recordkeeping began in 1963. New home sales have fallen 78% from their peak in July 2005.
Orders for durable goods — items expected to last three or more years — fell 1.1% in May after increasing a revised 3% in April. The drop was largely due to a decrease in demand for commercial aircraft. Excluding volatile transportation-related goods, orders posted a monthly increase of 0.9%.
In its third and final report, the Commerce Department announced that gross domestic product — the total output of goods and services produced in the U.S. — increased at an annual rate of 2.7% in the first quarter of 2010, rather than the 3.2% increase initially reported.
Initial claims for unemployment benefits fell by 19,000 to 457,000 for the week ending June 19. Continuing claims for the week ending June 12 fell by 45,000 to 4.54 million.
Upcoming on the economic calendar are reports on the housing price index on June 29, pending home sales on July 1 and factory orders on July 2.
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www.DavidJGarofalo.com

New home sales rose 26.9% in March to a seasonally adjusted annual rate of 411,000 units from an upwardly revised rate of 324,000 units in February. Economists had expected a pace of 330,000 units. It was the biggest monthly increase in 47 years.

The index of leading economic indicators — designed to forecast economic activity in the next three to six months — rose 1.4% in March after a revised 0.4% gain in February. It was the 12th straight monthly increase and the fastest pace of growth in 10 months.

The producer price index, which tracks wholesale price inflation, rose 0.7% in March, following a 0.6% decrease in February. Economists had expected a 0.4% rise. The increase was largely due to a sharp rise in vegetable prices after a cold snap damaged crops in Florida.

Existing home sales rose 6.8% in March to a seasonally adjusted annual rate of 5.35 million units from 5.01 million units in February. The inventory of unsold homes on the market rose 1.5% to 3.6 million, an 8-month supply at the current sales pace, down from an 8.5-month supply in February.

Orders for durable goods — items expected to last three or more years — fell 1.3% in March after a revised 1.1% increase in February. Excluding volatile transportation-related goods, orders posted a monthly increase of 2.8%.

Initial claims for unemployment benefits fell by 24,000 to 456,000 in the week ending April 17. Continuing claims for the week ending April 10 fell by 40,000 to 4.6 million.

Upcoming on the economic calendar are reports on the housing price index and consumer confidence on April 27, and gross domestic product on April 30.

Learning Center
Why Rates Change
We are committed to keeping clients informed about timely topics and trends in the mortgage industry. One common mortgage industry misconception is the correlation between the Federal Reserve Board’s announcements to raise or lower interest rates and the direct effect on fixed mortgage rates. While the two are connected, they don’t always go hand-in-hand.

Kinds of Rates

To better understand why mortgage rates change, we must first look at why interest rates change. First, it is important to realize that there is not just one interest rate, but many:

Prime Rate: The rate offered to a bank’s best customers and subject to change monthly.

Treasury Bill Rates: Treasury Bills are short-term debt instruments used by the U.S. Government to finance their debt. Commonly know as T-Bills, they come in denominations of 3 months, 6 months and 1 year. Each Treasury bill has a corresponding interest rate (i.e. 3-month T-bill rate, 1-year T-bill rate).

Treasury Notes: Intermediate-term debt instruments used by the U.S. Government to finance their debt. They come in denominations of 2 years, 5 years and 10 years.

Treasury Bonds: Long-debt instruments used by the U.S. Government to finance its debt.

Federal Funds Rate: Rates that banks charge each other for overnight loans.

Federal Discount Rate: Rate that the Federal Reserve charges to member banks.

LIBOR: London Interbank Offered Rates. Average London Eurodollar rates.

6-month CD Rate: The average rate that you get when you invest in a 6-month Certificate of Deposit.

11th District Cost of Funds: Rate determined by averaging a composite of depository rates at Savings & Loan institutions in the Western United States.

Ginnie Mae-Backed Security Rates: Ginnie Mae pools large quantities of mortgages, secures them and sells them as Ginnie Mae-backed securities. The rates on these securities influence mortgage rates on FHA and VA loans.

Mortgage Rates Refresher

Fixed interest-rate fluctuations are based on the concept of supply and demand. If demand for credit (loans) increases, so do interest rates. More buyers mean sellers can command a better price (i.e., higher rates). If demand for credit reduces, then so do interest rates. This is because there are more sellers, so buyers can command a lower better price (i.e., lower rates). When the economy expands, there is higher demand for credit, so rates increase. When the economy slows, the demand for credit decreases and so do rates.

Effects of Inflation

A major factor driving interest rates is inflation. Higher inflation is associated with a growing economy. When the economy grows too strongly, the Federal Reserve increases interest rates to slow the economy down and reduce inflationary risk. Inflation results from prices of goods and services increasing. When the economy is strong, there is more demand for goods and services, so the producers of those goods and services can increase prices. A strong economy therefore results in higher mortgage rates.

Mortgage Rates vs. Interest Rates

Fixed mortgage rates tend to move in the same direction as interest rates. However, actual mortgage rates are also based on supply and demand for mortgages. The supply/demand equation for mortgage rates may be different from the supply/demand equation for interest rates. This may result in mortgage rates moving somewhat differently from other rates.

Significance of Bond Prices

There is an inverse relationship between bond prices and bond yields. This can be confusing. When bond prices move up, interest rates move down and vice versa. This is because bonds tend to have a fixed price at maturity–typically $1000. If the price of the bond is currently $900 with 10 years left until maturity, and interest rates start moving higher, the price of the bond starts dropping. The higher interest rates accumulate over the next five years, meaning that a lower price (e.g. $880) will result in the same maturity price, i.e. $1000.